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laws of another EEA state to bring in assets and otherwise conduct the administration of the estate. These
regulations are subject to certain specified local laws eg in the areas of set‐off and registration of and
maintenance of real property rights. There are also functional requirements aimed at transparency dealing
with obligations to notify creditors and advertise the insolvency in affected EEA states.
It is often the case that an insurance company will also write reinsurance business. One of the important
effects of the 2004 Regulations is the departure from the long established principle of pari passu (equal
footing) distribution to creditors. Under these Regulations direct insureds are given priority above all other
creditors (including reinsurance creditors) on a winding up (ie liquidation) of the company. Since the
implementation of the immediate predecessor of these regulations (the 2003 Regulations referred to above)
stronger parallels can be drawn between the UK requirements of distribution of insolvent insurer estates and
the regime in the various States throughout the US. This change was significant in the thinking of UK creditors
of the UK branch of the Home Insurance Company (see case summary Home Insurance Co, Re [2005] EWHC
2485 below).
3. Non EU Cross‐Border
There are two main pieces of legislation relevant to office holders of re/insurance companies outside the
European Economic Area (EEA): the Cross‐Border Insolvency Regulations 2006, SI 2006/1030 and section 426 of
the 1986 Act. With regard to the former, it is a prerequisite that the insurance company in question is not an
EEA insurer within the meaning of regulation 2 of the 2004 Regulations namely as defined in the European
Third Directive mentioned above. A re/insurance company incorporated in Canada or the United States can
therefore be assisted by the courts of the UK on application of its office holder on the basis that it is not an EEA
insurer. The 2006 Regulations arise from the UNCITRAL Model Law on Cross‐Border Insolvency and are
sometimes described as the UK's equivalent of Chapter 15 of the US Bankruptcy Code. The 2006 Regulations
allow relief to be granted upon the foreign insolvency being recognised as a "foreign proceeding" in a UK
court. Once recognised, the foreign office holder ie "foreign representative" may obtain wide ranging relief
from the UK court eg injunctions staying the commencement and continuation of actions against the
company's assets and examination of witnesses and additional relief which normally would be available to a
British insolvency office holder under the law of Great Britain. Distribution of the assets located in Great Britain
may be, by court order, allowed to be made by the foreign representative. All of the above and further
assistance are subject to the many conditions set out in the 2006 Regulations.
The reciprocity provisions in section 426 of the 1986 Act have been available to office holders in certain
designated relevant countries for many years. The list of relevant countries include the Channel Islands, Isle of
Man and Guernsey as well as most of the British Commonwealth countries. Under this section, reciprocity is
granted on the basis that the courts having jurisdiction in relation to insolvency law in any part of the UK must
assist the courts having the corresponding jurisdiction in any part of the UK or any relevant country or territory.
This is done usually in the form of a letter of request from the foreign court to the UK court. This letter of
request gives authority to the court which receives the letter of request to apply in relation to the matters
specified in the letter of request the insolvency law applicable by either court in relation to comparable
matters falling within its jurisdiction. An example of the UK court assisting an office holder in a relevant country
would be the granting of an order by the UK court to the foreign liquidator to examine witnesses under section
236 of the 1986 Act and to take any action or issue proceedings available to an office holder under insolvency
law in the UK or under the insolvency law of the relevant country.
4. Schemes of Arrangement
One section of the case summaries appearing below relate to the creditor reorganisation mechanism of the
scheme of arrangement. The concept of a compromise or arrangement being reached by a company with its
creditors en masse is found in many jurisdictions. It has been available in the UK for well over 100 years in
various shapes and forms. In recent years in the case of corporate entities, this mechanism has arisen under
what was Section 425 of the UK's Companies Act 1985. With the introduction of the Companies Act 2006 (the
'2006 Act') during the course of 2005 and 2007, the statutory authority for schemes of arrangement is now
found in Part 26 of the 2006 Act. Its terms as far as compromises or arrangements with creditors are
concerned are identical to Section 425 (although the layout is a little different). All the case law therefore
applying to class issues and other aspects of schemes of arrangement therefore remain applicable.
The key requirements of the scheme mechanism are that: